Illinois coal production on increase, bucking national trend

Illinois coal had its best year in nearly two decades in 2012, even as production fell nationwide. Preliminary figures from the U.S. Energy Information Administration show Illinois mines produced 47 million tons of coal in 2012, the most since 1995.

Last year’s production was up 24 percent from 2011, the federal figures show.

“We’re obviously going against the national trend,” said Illinois Coal Association president Phil Gonet.

Gonet said he is somewhat skeptical of the EIA numbers, and he expects the final figure to come in at about 43 million tons once the production numbers are adjusted in a few weeks.

“But it was still a good year,” said Gonet.

In contrast, preliminary estimates from EIA are for a 7 percent decline in coal production nationwide for 2012 and another 3.6 percent decline this year, primarily as the result of a decline in power-plant demand.

The new Prairie State Energy Campus, a combination coal mine and power plant in southern Illinois, accounted for a significant amount of the state’s increase, producing nearly 7 million tons annually.

Gonet said new mines in southern Illinois and steady users such as City Water, Light and Power of Springfield — the utility burns about 1.2 million tons of coal a year — also contributed to Illinois’ strong year.

But overseas customers, especially in China and India, have been the fastest-growing market for high-sulfur Illinois coal in recent years, according to state and federal figures.

Going global

The Illinois Department of Commerce and Economic Opportunity expects shortly to receive a consultant’s report on ways to continue to increase exports, said Bill Hoback, director of the Office of Coal Development at DCEO.

“We’re trying to get a good idea on the global market and what we should be focusing on,” said Hoback. “We know we also need to focus on having the most efficient transportation system to get it there.”

According to DCEO figures, Illinois coal exports totaled nearly 7 million tons in 2011, about 20 percent of the state’s production that year. That compares with 2.5 million tons exported in 2010.

Another increase is expected when 2012 export figures become available this spring or summer.

“I believe over the next five years, we will be able to maximize every market,” said Hoback.

He said low water levels on the Mississippi River are a major concern for coal shippers, as the river provides the vital link to export markets. Expansion of the Panama Canal also is expected to boost demand for Illinois coal in coming years, he said.

“We will be able to load our coal onto those larger ships,” said Hoback.

Page 2 of 4 - Jobs keeping pace?

Coalfield employment in Illinois probably ended 2012 at 4,000 jobs, about where the year started.

Layoffs totaling more than 470 miners were announced in the final two months of 2012, including 408 at the Willow Lake Mine in southern Illinois and 67 at Shay Mine No. 1 near Carlinville, according to notices filed with the state.

Peabody Energy cited the cost of safety upgrades in closing the Willow Lake Mine, while state officials said cutbacks at Shay were for competitive reasons. About two dozen Shay miners already have taken jobs at other mines operated by parent company Cline Energy, according to DCEO.

Cline also has been hiring for the new Deer Run Mine, a longwall mine near Hillsboro.

“The last we checked, it was about 140 employees,” said Hillsboro Mayor John Downs. “Nearly all of them are from Montgomery County.”

Downs said the mine has helped keep younger residents in the area.

“There’s a lot of young people out there. They’ll send them to school, and they go to work,” said Downs. “They’ve done wonders by employing people in the county.”

However, Hillsboro hasn’t seen a boost in revenue, because most of the Deer Run coal is shipped overseas and is not subject to city or state sales taxes. The city and county should benefit from increased property tax revenue in the long run, he said.

FutureGen boost

An analysis released last week by Hanou Energy Consulting of Maryland concluded another 25 million tons of production will come online in the next two years in Illinois. The report cited exports, the relatively lower cost of Illinois coal and demand from plants where scrubber technology reduces emissions from high-sulfur coal.

Long-term demand could fall, however, as older coal-fired plants in the United States are shut down to comply with federal clean-air rules, the report found. Coal also faces increased competition from cleaner-burning natural gas.

Coal supporters still are counting on a boost from U.S. Department of Energy approval of the FutureGen carbon-storage project in Morgan County. That initiative would convert part of an Ameren power plant at Meredosia to provide carbon emissions for the experiment in clean-coal technology.

The carbon would be shipped by underground pipeline to a storage site 30 miles away in northeast Morgan County.

Ameren shut down its Meredosia and Hutsonville power plants in late 2011. The company concluded it would be too expensive to update the aging plants to meet the new clean-air standards.

Mike Murphy, manager of coal programs for the Office of Coal Development, said DOE is expected to rule in the next few weeks whether design and engineering work can begin on the $1.65 billion project.

Page 3 of 4 - Murphy said the signs have been encouraging up to now.

“It’s always been a part of our road map to get to zero-emissions coal,” said Murphy. “We think this year is going to be another banner year.”

HILLSBORO — Bill Schroeder says he has tried for years to get legislators interested in a tax on Illinois coal sold out of state.

“Other coal-producing states impose a severance tax on their natural resources,” said Schroeder, a member of Citizens Against Longwall Mining in Hillsboro. “We’re broke, and the state is losing a lot of money for every ton of coal that leaves its borders.”

Schroeder said he has found no interest among legislators up to now in levying state and local sales tax on coal shipped out of Illinois, but he intends to keep trying.

He said the anti-longwall group also has had an uphill fight in its effort first to block the opening of Deer Run Mine near Hillsboro and now to slow the extension of the longwall operation.

The group has asked for an administrative rehearing by the Illinois Department of Natural Resources, claiming the environmental damage that would be caused by the mine was not sufficiently considered before a permit was approved.

Critics say the longwall method — coal is removed in panels, rather than leaving behind support pillars of coal — increases the risk of surface subsidence, damages farmland and results in drainage problems.

“There’s already quite a bit of evidence of subsidence,” said Schroeder, who lives four miles south of Deer Run. “It’s quite evident where they’re mining.”

Illinois Sierra Club director Jack Darin said the state is unique among coal-producing states in not levying a severance tax on exports.

“With the apparent export of most of this coal, we’re getting very little value out of this land,” said Darin. “There’s also going to be a substantial cleanup cost.”

Darin said coal mining is a poor use of productive farmland.

“If there’s going to be this demand, we’re going to need to see a real upgrade in how this industry is regulated,” he said.

Larry Schraut, also a member of the citizens group, said his 600-acre corn and soybean farm south of Deer Run is directly in the projected path of the longwall operation.

“It’s probably another three or four years before it reaches here,” said Schraut. “There are lots of issues, but our big concern is subsidence of the farmland and returning it to where it can be farmed,” said Schraut.

Page 4 of 4 - He, too, said the organization is hoping for another hearing at DNR, but it has been a frustrating effort.

“We’re still here, and we’re still working,” said Schraut.

***

Illinois coal

* 2012 production estimated at 47 million tons, highest total since 1995.